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Economists React

Updated Sept. 20, 2005 4:02 p.m. ET

The Federal Reserve increased its key short-term interest rate, the federal-funds rate, by a quarter percentage point to 3.75% on Tuesday. The move, the 11th such increase in as many meetings, was widely expected despite speculation in the immediate aftermath of Hurricane Katrina that the central bank would pause its campaign of interest-rate increases. Policy makers noted that "the widespread devastation in the Gulf region, the associated dislocation of economic activity, and the boost to energy prices imply that spending, production, and employment will be set back in the near term," but by continuing to raise...